Friday, April 28, 2017

Is Authoritarian Nationalism Mostly A Rural Phenomenon?

Offhand it looks like maybe it is. In the US Trump won overwhelmingly in rural areas while losing all of the largest cities. Yes, he took some mid-size declining industrial ones like Youngstown, OH and Erie, Pa, while losing some rural areas in places like Vermont as well as areas with minority groups the majority of the population. But in general it holds, he won the countryside and lost the big cities.

In France, Marine Le Pen is also leading in some declining industrial cities of the Northeast for the upcoming presidential second round, but she loses in the larger growing cities such as Paris and Toulouse. Recently The Economist reported a study showing that as one goes from downtown Paris outward there is a linear and substantial increase in support for her. Again, the countryside is her base.

The Brexit vote was more for nationalism than authoritarianism, but in England it was the same pattern, countryside and declining industrial cities for it while London was strongly for Remain. Of course in Scotland, every county was pro-Remain, but that is a special case.

In Russia, where Putin apparently remains very popular, his base is also the countryside. The main location where one finds open opposition to him? Moscow, the largest, richest, and capital city.

So it looks like there is a pattern here, but there are some exceptions. One is to some extent Turkey, where authoritarian President Erdogan has long had strong support in the largest city, Istanbul. That support fell in the recent referendum vote increasing his power, which he narrowly won, possibly through fraudulent ballot stuffing. But it was more for him than Ankara and Izmir. But in fact it was rural areas that provided the base for the referendum to pass, although it was a near draw in very large Istanbul.

Another is Poland, where the Law and Justice Party has strong support in capital city Warsaw, despite its being full of high tech yuppies and all that. But the now dead Lech Kaczynski was its mayor from 2002-05 before he became president, only to die in a controversial plane crash in 2010. However, Law and Justice also has a strong base in certain rural areas, especially the poor and traditional Southeast.

I think in both of these cases what is involved is religion. Certainly the authoritarian nationalist movements in all these nations are pushing religion or using it, even if just in opposition to other religious groups, especially Muslims. But in both Turkey and Poland the majority local religions are making comebacks from long periods of suppression and trying to really take over their societies. In both of them, there are large numbers of strong followers of the nationally predominant religion in these particular large cities, and this may explain why we see these somewhat different outcomes in them compared to so many other nations experiencing this surge of ugly politics.

25 comments:

Most people are not aware that there are TWO economixes and that this has been the cause of endless confusion. Actually it is quite simple: there is political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics the scientific standards of material and formal consistency are observed.

The state of economics is this: theoretical economics (= science) had been hijacked from the very beginning by political economics (= agenda pushers). Political economics has produced NOTHING of scientific value in the last 200+ years. As a result of the utter scientific incompetence of political economists#1 economics is a failed science.

In methodological terms, economics is axiomatically false, that is, it is beyond repair. Accordingly, there is no progress at all in economics since 140+ years only the senseless multiplication of silly models which are based on the maximization-and-equilibrium axiom set.#2

As a consequence, what is needed is the Ultimate Separation. These are the options:

― Economics is thrown out of science.

― Political economists (= fake scientists) are thrown out of economics (= science).

As a corollary

― EconoSpeak changes its name to PoliticoBlather or

― Soap box economists like Barkley Rosser and Sandwichman are told to no longer abuse economics as a pretext for spreading their political opinion.#3

The nullification of political economics requires also the nullification of all scientific credentials (Master, PhD, Peer Reviewer, Journal Editor, Professor, Nobel Laureate) economists ever received since Walras/Jevons/Menger. Political economics is NOT science.

The rural-urban split is well-known, although not uncontroversial, in political science. So I'll make the snide remark that, once again, it took economists a while to figure out what political scientists hold as a given. (Krugman finally figured out class about five years ago, which sociologists knew was salient for, oh, over a century.)

But religion really isn't the driving force behind the split. It's more "tradition" that goes unchallenged because there is little diversity in rural areas--you don't tend to see others different from you. (Those who want diversity or a break from tradition leave for cities--self-selection bias.) Religion is part of that "tradition."

There's more to the story, obviously, but you could start with Karl Mark and 18th Brumaire--his observation that the peasantry, as a "sack of potatoes," is more likely to be reactionary than revolutionary.

Of course economists know about the urban-rural split. The point is that this most recent US presidential election has seen probably the sharpest such split in the voting outcome for a long time, I am not sure how long. Indeed, I am not sure what the largest city is that Trump won, but it is pretty far down the list, much farther down than the largest that Mitt Romney took in his losing bid four years ago.

As for Marx, he and Engels showed their one utopian moment in their platform at the end of the Communist Manifesto when they called for the end to this division. Hah! I have long joked that this was a prediction of the modern suburb.

I would add that historically there has been a tendency for authoritarian nationalism to have a strongly rural base. This was certainly true in the last German election prior to Hitler seizing supreme power when the electoral base of Nazi Party support was in the rural north, the Protestant part. For all the talk of Bavaria being conservative and Hitler using it as a base for his beer hall putsch, the pro-Catholic Center Party did well there, the predecessor of the modern Christian Democrats.

May I draw your attention to the fact that Marx’s characteristic of the ‘peasantry as a sack of potatoes’ is something like folk sociology but certainly not economics. Marx’s economics, on the other hand, was even more self-disqualifying than his sociology.

Fact is that Marx never figured out what profit is.#1 This is the worst thing that can happen to an economist. Clearly, when the core concept of economics is false then the whole analytical superstructure is false and the sociological implications have no sound theoretical foundations. From the correct profit theory follows the concept of cross-exploitation and this in turn explodes the concept of class.

It is a bit curious that After-Marxians have not detected and rectified Marx’s lethal error until this day.

Egmont Kakarot-Handtke

#1 See ‘Proﬁt for Marxists’https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2414301

Actually, the point of this post was to note that while lots of people are making this argument, that Trump et al are a super rural phenomenon, in fact in Poland and to some extent in Turkey, it is at least partly an urban phenomenon as well.

Egmont,

Let me ask you if your vacuous tautology of a theory of profit is good for anything, and I mean anything at all. So let us consider an issue much discussed here by me, Sandwichman, Peter Dorman, Brenda Rosser, and occasionally others, namely environmental economics. Near as I can tell your discussion of profit has always been at a macro national income and product accounts level, never at the micro level

So, let me play a game with you. Let us pretend that you are right that your theory of profit is actually wonderful. Let us see what it implies for environmental economics, and just to keep things simple, let me keep this to very orthodox neoclassical enviro econ rather than the more heterodox ecological econ that a lot of us here post about. So, standard theory says that environmental problems, let us focus on good old pollution, are an externality, a cost born by society that private agents do not bear when they dump pollution, unless somebody specifically acts to make them do so one way or another.

Now this does relate to profit. Non-Pareto optimal dumping of pollution occurs because profit-maximizing firms who do not count their polluting activities as a cost that subtracts from their profits do not have an incentive not to pollute as they seek to maximize their profits. Which brings us to an important point I have never seen you address. Does your theory assume that firms, or more precisely the capitalist owners of firms, seek to maximize profits? If it does, then does your theory in any way change the above analysis, or does it somehow say that magically firms are counting the pollution they generate as a cost against their private profits? Or does your theory say they do not seek to maximize profits, or perhaps are unable to do so for one reason or another, somehow also leading to them somehow taking into account pollution costs to society when they make their private decisions.

If in fact your theory says that they do not count pollution costs in their internal financial calculations, and if you also say that they seek to maximize their profits as you define them, well, Egmont, your theory adds zero to current standard discussions and does not overturn any of it in any way. Standard neoclassical environmental economics can continue to do its thing with your definition of profits with essentially zero change from what they were doing before. All your denunciations of nearly all economists are shown yet again to be ridiculous and vacuous.

What we need is to merge these two. For one, the urbans would get some agrarian responsibilities and experience. It would be nice for them to know where their crap goes, but, before that, let them see whence the food.

And, all of the other consumables that are assumed to be there (by wishing) ought to be seen as other than just a final trade with their neighborhood merchant or that big-daddy in the sky (what's his name, Bezo?).

Then, a little respect from the coddled, stressed-out urbanites might not be to hard for them to do. Actually, classes in cities pass each other without any interchange (that would be a start - put some high-end (wherever in NY - along the big park) person out in a tool-booth for a week (ah, would love to see that).

Disclosure: I suppose that I don't need to point to where I sit.

Then, we, out here, wouldn't call such folks city-slickers or such.

BTW, in terms of the U.S., in my younger day the draft went some ways toward bringing together all sorts from all over. This was especially the case during WWII (and partly so in WWI). So, we could talk national service of some sort.

City slickers would learn about rural realities; we would send some bumpkins up to the crazed cancer that are the larger cities.

---

Actually, you miss a point. It is the belief system that causes the bifurcation in the beginning. Let's go back and look at the western expansion plus or minus about 50 years. Out in the wilds, one learns to rely on one's self and such as are kin (of all types).

In the rat cage of the city, what happens? I don't think that we know. But, it does breed something that is not amenable to proper living. Alas.

Economics ― a doctor worse than the diseaseComment on Barkley Rosser on ‘So, let me play a game with you’ as an intermezzo of ‘Is Authoritarian Nationalism Mostly A Rural Phenomenon?’

You propose: “So let us consider an issue much discussed here by me, Sandwichman, Peter Dorman, Brenda Rosser, and occasionally others, namely environmental economics. Near as I can tell your discussion of profit has always been at a macro national income and product accounts level, never at the micro level.”

And you conclude: “If in fact your theory says that they do not count pollution costs in their internal financial calculations, and if you also say that they seek to maximize their profits as you define them, well, Egmont, your theory adds zero to current standard discussions and does not overturn any of it in any way.”

Let us agree on three things: (i) environmental protection is an issue since at least 3000 BC,#1 that is, an issue that is ― as a matter if principle ― independent of the current state of economics, (ii) environmental protection is multidisciplinary, that is, with a host of sciences bringing their specific knowledge to the table, (iii) in order to play a useful role economics, too, has to provide scientific knowledge.

This does not only hold for environmental protection but for economic policy IN GENERAL: “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

The snag is that economists do NOT have the true theory, the four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal economic concept profit wrong.

From this follows that economic policy guidance NEVER had a sound scientific foundation since Adam Smith/Karl Marx. This in turn means that the well-meant advice of economists more often that not WORSENS the situation. Mass unemployment is a case in point. Put bluntly, scientifically incompetent economists are a hazard to their fellow citizens and humanity.

The PRIMARY task of economists is to develop the true economic theory. Economists have failed at this task because they dabbled in all disciplines from psychology, sociology, political sciences, geopolitics, law, history, anthropology, social philosophy, biology/evolution theory to ecology but NEVER managed to define the core concepts of their own discipline properly.#2

The Palgrave Dictionary summarizes: “A satisfactory theory of profits is still elusive.” (Desai, 2008) and this means that economics is the greatest nuisance in the history of the sciences. Before economics can contribute anything to human welfare or environmental protection it has to rise above the current proto-scientific level.

Because the foundational concept profit is axiomatically false the whole theoretical superstructure is false. Standard economics is built upon microfoundations, that is, upon a set of behavioral axioms.#3

This is methodologically the wrong starting point. Economics has to be macrofounded.

The macrofounded Profit Law is shown on Wikimedia.#4 Its implications for economic policy are profound.

You argue: “Non-Pareto optimal dumping of pollution occurs because profit-maximizing firms who do not count their polluting activities as a cost that subtracts from their profits do not have an incentive not to pollute as they seek to maximize their profits.”

This, of course, is trivially true from the myopic micro perspective. But microeconomics is false because it always runs straight into the Fallacy of Composition. For the economy as a WHOLE holds as a general rule that total profit does NOT decrease if firms increase environmental protection. If capitalists were indeed a class instead of a bunch of micro-brained morons and think in class terms (as micro-brained Marx falsely claimed they do) they would recognise that pollution does NOT increase overall profit and enviromental protection does NOT reduce overall profit. From the macro perspective enviromental protection is no economic problem at all. It is a pseudo problem that derives ultimately from the scientific incompetence of economists.

What is true for the firm is NOT true for the economy. Microfounded economics is false. The representative economist has not gotten it since Jevons/Walras/Menger and it is pretty obvious that you will never get this: If it isn’t macro-axiomatized, it isn’t economics.

Egmont Kakarot-Handtke

#1 Wikipediahttps://de.wikipedia.org/wiki/Umweltschutz

#2 See also ‘Economists: Jacks of all trades ― except economics’http://axecorg.blogspot.de/2016/11/economists-jacks-of-all-trades-except.html

#3 HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states. (Weintraub) Every model that applies just one of the axioms is false.

Sorry, Egmont, you have failed to make your case. You admit that the environmental argument is "trivially" true at the micro level, then, unsurprisingly you leap back to the macro level where you have defined your special theory of profit, which you made no reference to in your argument other than to repeat your silly claim that all of (macro)economics is wrong because economists do not use your theory of profit. Sorry, that does not cut it.

In #3 you list four axioms that are not necessarily true, although their truth or falsity is also completely independent of accepting or rejecting your vacuous tautology of a theory of profit. And as far as I am concerned, one can still make an analysis of both the simpler problem of externalities as well as the broader transdisciplinary issues in ecological economics without necessarily relying on any of those four axioms, although it does make things easier if they hold.

But let me pin down more precisely how vacuous and useless your theory of profit is. There has been much discussion of environmental issues here, especially ones involving global climate, including of the various possible policies that might be used to deal with it, economic policies that is. You may reject such discussion as baseless "political economics," but the fact is that lots of people, including a lot of non-economists have gotten involved in these arguments, with carbon taxation a currently fashionable among many activists policy to push. I have been a holdout on that here, defending cap and trade (with both allowed under the Paris agreement, although perhaps you think that all economic policyh analysis underlying that agreement should not have been done).

As it is, there are lots of other possible policies one can use, including command and control quantity emissions limits, subsidizing private emitters, organized games, and quite a few more. Does your theory of profit aid at all in analyzing which of theses might be preferable? I do not think so.

Let me hammer this with a final point, that many libertarians like voluntary mechanisms based on the Coase Theorem. However, it is very clear that the Coase Theorem is useless for global climate issues because its conditions of property rights existing and transactions costs being low do not hold at all. For the latter such costs are above all negotiation costs, and they rise with the number of parties involved, which in this case is everybody on the planet. It is simply obvious the theorem and its approaches are useless. But would your theory of profit have anything to say about this? No, nothing.

You say: “In #3 you list four axioms that are not necessarily true, although their truth or falsity is also completely independent of accepting or rejecting your vacuous tautology of a theory of profit.”

The axioms HC1-HC5 are ― see the original paper of Weintraub ― the foundations of standard economics from Jevons/Walras/Menger to DSGE including all textbooks. You may know it or not, but as a standard economist you are committed to them. Krugman, for one, is very explicit about this: “most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point.”

The maximization-and-equilibrium world you and all the other cargo cult scientists inhabit is a nowhere-world and every economist who takes the words maximization and equilibrium in his mouth is scientific toast.

You have argued “optimal dumping of pollution occurs because profit-maximizing firms who do not count their polluting activities as a cost that subtracts from their profits do not have an incentive not to pollute as they seek to maximize their profits.”

Conclusion: As a standard economist you are by definition committed to the neo-Walrasian axioms HC1-HC5, however, you maintain that they “are not necessarily true”. Among persons with more than one brain cell this is called a contradiction.

Fact is that the neo-Walrasian axiom set HC1-HC5 is methodologically forever unacceptable. Every model that applies just one of the axioms is false. This holds for the ‘normal’ models like supply-demand-equilibrium as well as for models that deal with environmental issues.

Your statement “Non-Pareto optimal dumping of pollution occurs because profit-maximizing firms who do not count their polluting activities as a cost that subtracts from their profits …” is trivially true under the CONDITION that one accepts HC2 as true axiom which NO scientifically competent person ever will.

Because the microfoundations HC1-HC5 and ALL inferences that follow from them are methodologically forever unacceptable the whole of economics has to move from false microfoundations to true macrofoundations. This is called a paradigm shift.

From the true macrofoundations follows, among others, the Profit Law and the employment equation which are readily testable.* So, the only question is: are these objective relationships materially and formally consistent and NOT AT ALL whether the Profit Law is useful in the discussion about environmental policies. This is as idiotic as the question whether the Law of Gravity is useful in the discussion about environmental policies.

An economists who takes part in a policy discussion without knowing the macroeconomic Profit Law* is a laughing stock just like a physicist who does not know the Law of Gravity.

Your political agenda-pushing lacks sound scientific foundations.

Egmont Kakarot-Handtke

* See ‘How to overcome the manifest silliness of Econ 101 and save the economy’http://axecorg.blogspot.de/2017/04/how-to-overcome-manifest-silliness-of.html

and ‘How the Intelligent Non-Economist Can Refute Every Economist Hands Down’https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2705395

I happen to know and respect Roy Weintraub, but just because in a single paper he gave this list of axioms does not therefore make it the fundamental list that all economists subscribe to. I do not and never have. Actually a more accurate list, and Roy knows this, would be those that underly general equilibrium theory, some of which are those and some of which are not, although I am not going to waste time listing them. However, they are all also empirically false. This does not stop most economists from continuing to function.

Apparently, since you reject the constrained optimization axiom, you do not think that firms seek to maximize profits. What then does your vacuous theory of profit consist of? If no other economist can say nothing if they reject that axiom, how can you say anything about what firms do or about economic policy debates if you do not posit what firms actually do with regard to profits? Your theory remains utterly useless.

In case you are unaware of the fact, Egmont, I edit the Review of Behavioral Economics (ROBE) and for a decade I edited the Journal of Economic Behavior and Organization (JEBO). Apparently you know nothing about behavioral economics, which has been around since at least the 1950s since the work of the late Herbert Simon, also a friend of mine. As it is, behavioral economics basically accepts none of those axioms. How does it work? It seeks to empirically determine and understand how people behave when dealing with economic matters. Among its tools in this investigation is experimental economics, which I explained to you previously is carried out in a scientific matter, with the example of Nobel prize winner Vernon Smith being representative. No need for those axioms, whichever ones you want to declare are so fundamental, no need at all.

Game was over when I showed that you were full of it when you tried to argue that Vernon Smith skewed his experimental results to fit ideological priors and I showed that you were dead wrong. He accepts that speculative bubbles happen because he found them happening in experiments, even though this undermines his general ideological support for free market oriented policies. You still need to deal with this hard reality rather than just repeating the same old incoherent drivel that you constantly hand out.

You became boring some time ago, Egmont. Acceppt that your profit theory is useless and that economists can and do operate without any of the axioms you might thing are so necessary for "scientific economics." Deal with it and learn a few things.

Imagine, Newton has just published the Law of Gravity and a man comes to him and says: Isaac, your Law is vacuous and absolutely useless in my molehill research.#1

True, but irrelevant. Just as presenting your academic CV is irrelevant. Your whole argumentation is way beside the point, it does NOT prove what you are repetitively asserting.

The salient point is that economists are supposed to explain how the (world-) economy works (= economic universe) and not how the firm works or how the consumer decides between strawberry and blueberry yogurt. These questions can be left to junior consultants and psychologists.

The salient methodological point is that NO way leads from the understanding of human behavior (= microanalysis) to the understanding of the behavior of the economy (= macroanalysis). Partial analysis is NOT generalizable.

Fact is that the subject matter of economics is misspecified: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” (Arrow)#2

This commitment to methodological individualism translates into the neo-Walrasian axiom set: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

From these microfoundations supply-demand-equilibrium is derived and then it goes on to General Equilibrium and ends with the welfare theorems. Because methodological individualism is false, the behavioral microfoundations HC1-HC5 are false. Because the axioms are false, General Equilibrium is false and the welfare theorems go down the toilet.

The WHOLE of standard economics is cargo cult science and you are part of it. ALL variants of behavioral economics have to be thrown out of economics as dilettantish and utterly useless folk psychology/sociology. Marginalism is dead since 140+ years but the representative economist has NOT realized it.

The failure of maximization-and-equilibrium economics means that economic policy guidance NEVER had sound scientific foundations from Adam Smith/Karl Marx to Barkley Rosser. It’s all political blather in the bluff package of science.

Let this sink in: molehill economists from Adam Smith/Karl Marx to Barkley Rosser cannot tell how the profit of the economy as a whole is determined. With their utter scientific incompetence they bear the intellectual responsibility for the social devastation of mass unemployment since the Great Depression ― among others.

Napoleon realized this long ago: “Late in life, moreover, he claimed that he had always believed that if an empire were made of granite the ideas of economists, if listened to, would suffice to reduce it to dust.” (Viner)#3

So, let us stop listening to Barkley Rosser and his silly molehill buddies and do real scientific work, that is, the paradigm shift.

Egmont Kakarot-Handtke

#1 “There is no doubt a strong tendency to revolt against abstract reasoning. Human nature has a strong ‘factish’ element in it. The reasonings of Principia are now accepted. But in the beginning they were ‘mere crotchets of Mr. Newton’s’” (Bagehot)

#2 See ‘How Arrow pushed economics over the cliff’http://axecorg.blogspot.de/2017/03/how-arrow-pushed-economics-over-cliff.html

#3 See ‘Economists and the destructive power of stupidity’http://axecorg.blogspot.de/2017/02/economists-and-destructive-power-of.html

Egmont, you just keep repeating yourself even when it is pointed out that you are wrong. Regarding that set of five axioms that you got from some oddball paper by Roy Weintraub, it simply is not the set of axioms that underlie standard general equilibrium theory, although some of them are part of the set. Please go check a standard grad micro textbook like Mas-Colell, Whinston, and Green or maybe Varian. Or, heck, go read Debreu's Theory of Value. Weintraub certainly is one of the leading experts on the history of general equilibrium theory, but this is simply not the set of axioms that underlie it.

Pretty obviously you are uninterested in microeconomics, declaring that, for example, the theory of the firm is something to be understood by "junior consultants" and consumer behavior by "psychologists," although if these people do not know your theory of profit, how are they going to explain either of those? But I guess you admit your theory of profit has nothing to say about either of those, although the vast majority of what economists study is microeconomics, subjects like the theory of the firm and the theory of consumer behavior, and applications of them to many topics, none of which you even now pretend you have a word to say anything about, although somehow you think non-economists can explain them.

Let me return to a topic I have already mentioned and that you have airily dismissed, and I think have essentially admitted you have nothing to substantive to say about, namely environmental economics. You admit that pollution is a problem, but dismiss it as either something that can be understood by "common sense" or else is a matter to be studied by a vast array of disciplines besides economics, the latter especially if we focus on global warming, viewed by many as the most important issue facing humanity.

There are policy issues that involve economics, such as should tax carbon or set up cap and trade systems for carbon. Do you think economists should not discuss this issue? Maybe you think it is just fine that climatologist James Hansen has said that carbon taxation is the only way to go. But then we have Donald Trump, not a climatologist, saying that the idea of global warming is a Chinese hoax. Pretty obviously your theory of profit says nothing about any of this, nothing. It is simply useless.

BTW, this is all I have to say on this thread, Egmont, which I am sure is more than anybody has wanted to read. I imagine you want to say more, but given your track record, I think I can say it for you.

All economics is wrong because it depends on the five axioms you got from Weintraub, and they are wrong. Your theory of profit overcomes the problems, although it is unable to explain any microeconomic phenomena, which should be left to sociologists and climatologists, or maybe junior counsultants. Your theory apparently might help us achieve full employment, although somehow you have never explained exactly how.

You say: “Regarding that set of five axioms that you got from some oddball paper by Roy Weintraub, it simply is not the set of axioms that underlie standard general equilibrium theory, although some of them are part of the set.”

In his paper, Weintraub gave a VERBAL description of the neo-Walrasian axiom set. It has been FORMALIZED in detail by Debreu, Arrow, Hahn, Mas-Colell et al. The curious thing is that the axioms differ slightly between authors which only tells us that neoclassical economics is NOT properly axiomatized and that the representative economist does NOT know what the formal foundations of his paradigm are. But you certainly agree that maximization-and-equilibrium are the common core of ALL neoclassical axiom sets. Because these two axioms are false, ALL variants of standard economics are false.

You say: “Pretty obviously you are uninterested in microeconomics.” This is NOT the case. Fact is that I am uninterested in your molehill-monty-python economics. My argument is that to start with behavioral axioms and then to proceed bottom-up to macro is false. The methodologically correct way is to start with macrofoundations and then to proceed top-down. This is what paradigm shift means.#1

You say: “you have airily dismissed, and I think have essentially admitted you have nothing to substantive to say about, namely environmental economics.” The PRIORITY of the economist is to say something SUBSTANTIVE about the ECONOMY. You have failed on the core task and because of this your environmental economics is distractive blather. An economist who cannot tell what profit is cannot contribute anything to an economics issue much less so to any other issue.

You are an economist but cannot tell what profit is. You are not alone in your abysmal incompetence: “Nor do the modern variants add anything whatever on this score. For Debreu profits are simply a nonissue, while Arrow and Hahn make only passing reference to profits ― and that only as a historical introduction. Whatever may be the usefulness of these idealized theoretical constructs, they cannot be said to throw any light on the profit issue; surely, therefore, they fail to capture the essence of a capitalist market economy. (Obrinsky, 1981)

You say: “Your theory apparently might help us achieve full employment, although somehow you have never explained exactly how.” Stop blathering, learn reading, follow the link and the references.#2 Even better, take the remote control, sit down on the couch and look sitcoms.

Egmont Kakarot-Handtke

#1 See ‘How to finally hammer down the nails in the coffin of Monty Python economics’http://axecorg.blogspot.de/2017/01/how-to-finally-hammer-down-nails-in.htmland ‘Essentials of Constructive Heterodoxy: Behavior’https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2600523

#2 See ‘How economists murdered the economy and got away with it’http://axecorg.blogspot.de/2016/11/how-economists-murdered-economy-and-got.html

My last comment on this thread, as you are just repeating yourself again and again.

Here are the axioms on the preference sets of agents sufficient for the existence of general equilibrium. None of them have anything to do with a theory of profit, any theory of profit. Just not a part of it.

As it is, most economists know that these do not universally hold, and some of the schools of economics that you dismiss because you claim they do, do not at all, including Post Keynesian. I do not think I have ever met one Post Keynesian economist who strongly accepts this set as holding in reality.

Now you say: “Here are the axioms on the preference sets 1. completeness 2. reflexivity 3. transitivity 4. continuity 5. monotonocity 6. convexity.” This set of CONDITIONS is merely the detailed SPECIFICATION of the notion of PREFERENCES in Weintraub’s axiom HC1.

Your five conditions are auxiliary, just as the specification of a production function is auxiliary to the axiom set HC1-HC5. The simple reason for the introduction of these ILLEGITIMATE auxiliary conditions is that without these specifications the second axiom “HC2 agents individually optimize subject to constraints” does NOT work and the WHOLE of marginalism, which hinges alone on HC2, BREAKS DOWN.

You say: “the axioms on the preference sets of agents [are] sufficient for the existence of general equilibrium.”

This is clearly NOT the case. Equilibrium is INTRODUCED with the fifth axiom: “HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” This methodological blunder is known since antiquity as petitio principii.

You say: “None of them [the axioms/conditions] have anything to do with a theory of profit, any theory of profit. Just not a part of it.” Of course not, profit cannot be put into the axioms but has to be DERIVED from them just like the Pythagorean theorem is DERIVED from the Euclidean axioms.

The point is that the correct profit law/profit theorem* FOLLOWS from macrofoundations, i.e. the set of objective/behavior-free/systemic axioms, but NOT from the neo-Walrasian microfoundations. From microfounations follows NOTHING about profit for the economy as a whole. This is why the Palgrave Dictionary summarizes: “A satisfactory theory of profits is still elusive” which is the most damning verdict about standard economics. After 200+ years economists cannot tell what profit is.

The point of axiomatization is that the WHOLE of economics follows consistently from the correct macro axiom set just like the WHOLE of Euclidean geometry follows from the Euclidean axiom set. The whole of standard economics is false because the neo-Walrasian axioms HC1-HC5 (including all auxiliary conditions) are false. And this is why a paradigm shift is needed.

This is known at least since 1990: “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al.)

After you have made a complete fool of yourself you can now enjoy your retirement.

BTW, Anonymous, I generally have contempt for people who post anonymously, although maybe you have some sensitive job where they will fire you if you post here. I am aware that this really is the case for some people, but I bet it is not for you.

True macrofoundations: the reset of economicsFinal comment on Barkley Rosser

The ultimate reason for the senseless proliferation of micro/macro models is that they are methodologically false, more precisely: axiomatically false, and therefore fail sooner or later. After the definitive refutation of false Walrasian microfoundations and false Keynesian macrofoundations it is time for the true macrofoundations of economics. The methodological rule to follow is known since 2000+ years: “When the premises are certain, true, and primary, and the conclusion formally follows from them, this is demonstration, and produces scientific knowledge of a thing.” (Aristotle)

This is the correct core of premises:(0) The objectively given and most elementary systemic configuration of the (world-) economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm.(i) Yw=WL wage income Yw is equal to wage rate W times working hours. L,(ii) O=RL output O is equal to productivity R times working hours L,(iii) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.These premises are certain, true, and primary, and therefore satisfy all methodological requirements. The set of premises is minimalistic, that is, Occam’s Razor has been applied and the set cannot be reduced further, only expanded. The set contains no nonentities like maximization or equilibrium and no normative assertions. The graphical representation is given on Wikimediahttps://commons.wikimedia.org/wiki/File:AXEC31.png

At any given level of employment L, the wage income Yw that is generated in the consolidated business sector follows by multiplication with the wage rate W. On the real side, output O follows by multiplication with the productivity R. Finally, the price P follows as the dependent variable under the conditions of budget balancing, i.e. C=Yw and market clearing, i.e. X=O. Note that the ray in the southeastern quadrant is NOT a linear production function; the ray tracks ANY underlying production function. Note also that the wage rate W is an AVERAGE if the individual wage rates are different among the employees, which is normally the case.

Under the conditions of market clearing and budget balancing in each period the price is given by P=W/R (1), i.e. the market clearing price is always equal to unit wage costs. This is the MOST ELEMENTARY form of the price theorem also called LAW OF SUPPLY AND DEMAND. Note in passing that there is NO such thing as supply function, demand function, or production function with decreasing returns.

If the wage rate W is lowered, the market clearing price P falls. If the number of working hours L is increased the price remains constant, provided productivity R does not change. If productivity decreases the price P rises. If productivity increases the price falls. In any case, labor gets the whole product, the real wage W/P is invariably equal to the productivity R according to (1), and profit for the business sector as a whole is zero. All changes in the system are reflected by the market clearing price. The elementary market economy is indefinitely reproducible under the condition of no external/physical limitations like space, raw materials etcetera, which ALL have to be introduced later in the course of an ever more detailed analysis.

This has been the first step. With the second step the conditions of market clearing and budget balancing have to be lifted. This GENERALIZATION produces the phenomena of inventory changes (O-X greater than 0 or less than 0) and of saving/dissaving (Sm≡Yw-C greater than 0 or less than 0) and of monetary profit/loss (Qm≡C-Yw greater than 0 or less than 0).

It always holds Qm+Sm=0 or Qm=-Sm, in other words, the business sector’s deficit (surplus) equals the household sector’s surplus (deficit). Loss is the counterpart of saving and profit is the counterpart of dissaving. This is the most elementary form of the PROFIT LAW. Profit for the economy as a WHOLE has NOTHING to do with productivity, the wage rate, the working hours, exploitation, competition, or the smartness of business people.

Given the minimalist core propositions (0) to (iii) one has to proceed top-down by successive DIFFERENTIATION until one arrives at the INDIVIDUAL agent. Differentiation is the opposite of bottom-up or aggregation. The bottom-up approach, also called methodological individualism, is false because it runs with necessity into the Fallacy of Composition.

How to reset economics: (a) THROW OUT the neoclassical and Keynesian set of premises. (b) Take the premises (0) to (iii) as common core of ALL economic analysis. (c) Differentiate the common core, that is, INCREASE COMPLEXITY successively, and derive ALL observable economic phenomena and relationships CONSISTENTLY from the common core. (d) Take the first opportunity to TEST one of the derived complex relationships. (e) If the relationship is corroborated continue with differentiation and solve concrete economic problems, otherwise look for a new set of foundational premises. This is how paradigm shifts work.

The acceptance of the premises (0) to (iii) depends ALONE on the outcome of empirical tests of more elaborate theorems, which have to be carried out independently by econometric experts, and NOT AT ALL on whether one likes the macro axioms or not, and certainly not on any political preconceptions: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant) Economics has to be strictly SEPARATED from politics. Political economics has produced NOTHING of scientific value in the last 200+ years.

For ALL economic research, the premises (0) to (iii) are the macrofoundations that are ABSOLUTELY necessary ― as Aristotle put it ― “to produce scientific knowledge of a thing.” It holds: If it isn’t macro-axiomatized, it isn’t economics.

I just cannot resist. Since you have made so much of your "PROFIT LAW," let me just point out how your statements about it are not merely vacuous but wrong, even within your own model. You make at least two easily-shown-to-be false statements. They are that profit has nothing to do with wages or productivity. That is only true when you add in auxiliary assumptions for which there is no reason that they are true.

So, let us allow w to fall, but hold everything else constant, including that supply equals demand or X=O=C. Well, with w lower, wL is lower, but with P and X unchanged, we now have C+PX-wL > 0. What is that positive amount? Looks like profit to me and I think any reasonable observer. Of course in your dicussion you assumed that when w falls P fall, but there is absolutely no reason for that to happen, Egmont, none. This is a crucial important added assumption you make to achieve your silly and empty outcome. I think most would agree that if prices were to conveniently fall when wages fall, then profits might not rise with falling wages. But, as noted, there is no reason for this to necessarily happen, and in fact in the real world we see no direct relation between wages and prices. This is the absurd and unreaslistic assumption you have imposed to come to your utterly ridiculous result.

A similar problem arises for your claim that productivity does not influence profits. In this case you impose that Prices must rise if productivity rises. If that does not happen then we are back to there being some positive profit appearing. And in the real world, if anything, one finds arguments that prices are more likely to fall (or rise less rapidly) when productivity improves. Again, you have added an unrealistic assumption to get your supposedly universal outcome that is supposed to replace all of the last 200 years of supposedly scientific economics.

I could go on, there are so many other problems and holes in this ridiculous and vacuous apparatus you have presented, but these two along pretty much shut down your show, especially given how central you make your "PROFIT LAW" to the whole shebang.

And now I really will not reply any further, or to anybody else either.

Market clearing is defined as X=O, i.e. quantity sold per period X = quantity produced per period O. You write X=O=C. According to axiom (iii) C is a NOMINAL variable, i.e. dollar per period. A REAL flow can NEVER be equal to a NOMINAL flow because of the different DIMENSIONS.

So with X=O=C you have yourself knocked out already in the 2nd line of your comment. Let us go into details nonetheless.

You write C+PX-wL > 0. Because of (iii), i.e. C=PX, this is equal to 2C-wL>0, which is devoid of any sense. It is NOT profit because monetary profit Qm is defined as Qm≡C-Yw (see above part 2) and measurable with the accuracy of two decimal places.

In the initial case, the price has been defined as DEPENDENT variable. According to the price theorem P=W/R the price falls under the condition of market clearing X=O and budget balancing C=Yw if the wage rate W is reduced. Market clearing and budget balancing are two concepts that are familiar to every dull Econ 101 student.

If the price is not the dependent variable, i.e. if it does NOT perform its market clearing function, then the quantity sold X becomes the dependent variable and the condition of market clearing, i.e. X=O, NO longer longer holds. In other words, X is in this case less than O and the business sector’s INVENTORY GOES UP under the condition of budget balancing C=Yw. This case has been treated at length elsewhere.#1

If you were not so abysmally incompetent you could have figured this out for yourself. C=Yw translates into PX=WL. If you reduce W on the right hand side then ― logically ― either P or X or both have to be reduced on the left hand side (ask in the kindergarten for a math introduction if you do not understand what the = sign means). Under the additional condition of market clearing X=O the price must ― logically ― fall.

Whether the market is cleared or not, though, is IRRELEVANT for profit. Monetary profit for the economy as a whole is defined as Qm≡C-Yw and as long as the budget is balanced, i.e. C=Yw, overall profit is ZERO, NO MATTER what productivity, employment, wage rate or price are.

Your error/mistake/blunder is that you are accustomed to argue from the perspective of a single firm (= micro). Yet, what holds for micro does NOT hold for macro. Obviously, nobody has ever heard of the Fallacy of Composition at Trump University.

The elementary Profit Law, i.e. Qm=-Sm, is UNIVERSAL, that is, it does NOT AT ALL depend on any specific assumption about market clearing or budget balancing.#2 You will never get this nor anything else.

Egmont Kakarot-Handtke

#1 See working papers on SSRNhttps://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1210665

#2 Elementary means pure consumption economy. With government, foreign trade and all the rest added the Profit Law reads Qm≡Yd+(I-Sm)+(G-T)+(X-M). Neither Walrasianism, nor Keynesianism, nor Marxianism, nor Austrianism got the Profit Law right in 200+ years. This is why economics is a failed science.